A Brief Introduction to Delta (Hedge Ratio)
What you have seen in Example 2.5 is the phenomenon of Delta. Delta is measured as the change in option price divided by the change in the underlying asset price.
As you just witnessed, when a call option becomes In the Money (ITM), the Delta increases. So the higher the Delta, the faster the option price is moving as compared with the stock price. However, buying Out of the Money (OTM) options is not the answer either because by doing that you reduce your chances of success because the change in option price (compared with the stock price) is much slower, therefore it is more difficult to make profit; ...
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